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Problem 22-4A (Concluded)
Supporting Footnotes
Note C
Beginning receivables....................................................... $ 342,248
Credit sales........................................................................ 1,001,701
Ending raw materials inventory*...................................... $ 80,000
*Also equals 4,000 units @ $20 = $80,000
**30,000 units x $20 per unit
Note E
Note F
Beginning equipment........................................................ $ 600,000
Purchased in June............................................................. 130,000
Total.................................................................................... $ 730,000
Note G
Purchases of raw materials.............................................. 581,500
Payments for raw materials.............................................. (600,000)
Ending accounts payable.................................................. $ 182,000
Note I
ZIGBY MANUFACTURING
Budgeted Statement of Retained Earnings
For Three Months Ended June 30, 2015
Retained earnings, beginning......................... $208,788
Add: Net income......................................... 43 ,485
Problem 22-5A (60 minutes)
Part 1
KEGGLER’S SUPPLY
Merchandise Purchases Budgets
For March, April, and May
March April May
FOOTWEAR
Budgeted sales for next month............................25,000 32,000 35,000
Ratio of ending inventory to future sales........... 30% 30% 30%
Budgeted ending inventory.................................. 7,500 9,600 10,500
SPORTS EQUIPMENT
Budgeted sales for next month............................90,000 95,000 90,000
Ratio of ending inventory to future sales........... 30% 30% 30%
Budgeted ending inventory..................................27,000 28,500 27,000
Budgeted purchases............................................. 17,000 91,500 93,500
APPAREL
Budgeted sales for next month............................38,000 37,000 25,000
Ratio of ending inventory to future sales........... 30% 30% 30%
Problem 22-5A (Continued)
Part 2. Analysis Component
budgeted purchases are smaller because it is management’s goal to reduce
the inventory to only 30% of the next month’s sales.
This overstocking factor could exist for a number of reasons, including:
Management may have simply lost sight of inventory levels, thereby
allowing them to reach inappropriately high levels.
Competition among suppliers may have caused them to become more
customer oriented, with the result that they will deliver products in
smaller lots more quickly.
Problem 22-6A (50 minutes)
ONEIDA COMPANY
Cash Budget
For September, October, and November
September October November
Beginning balance..........................................$ 5,000 $ 99,250 $ 69,500
Payments on accounts payable**............... 100,000 217,000 228,000
Payroll............................................................ 20,000 22,000 24,000
Rent................................................................ 10,000 10,000 10,000
Other expenses............................................. 35,000 30,000 20,000
*** Interest at 12% on $100,000 for 3 months is $3,000.
Supporting schedules
Collections of credit sales* August September October November
Aug. sales ($215,000)—[25%: 45%: 20%: 9%].................$ 53,750 $ 96,750 $ 43,000 $ 19,350
Sept. sales ($250,000)—[25%: 45%: 20%]........................ - 62,500 112,500 50,000
Payments on credit purchases** August September October November
Aug. purchases ($125,000)—(0%: 80%: 20%).........................................$ 0 $100,000 $ 25,000 $ -
Sept. purchases ($240,000)—(0%: 80%: 20%)........................................- 0 192,000 48,000
Problem 22-7A (70 minutes)
Part 1
Cash collections of credit sales (accounts receivable)
From sales in Total % Collected June July
April..............................................$ 720,000 28% $201,600
May............................................... 360,000 50 180,000
............................................... 28 $100,800
Part 2
Budgeted ending inventories (in units)
April May June July
Next month’s budgeted sales...................... 2,000 6,000 5,000 3,800
Ratio of inventory to future sales............... 20% 20% 20% 20%
Part 3
AZTEC COMPANY
Merchandise Purchases Budgets
For May, June, and July
May June July
Budgeted ending inventory (from part 2)............. 1,300 1,100 860
Add budgeted sales.......................................... 2,000 6,000 5,000
Required units of available merchandise........ 3,300 7,100 5,860
Budgeted cost of merchandise purchases........
$308,000 $638,000 $523,600
Problem 22-7A (Continued)
Part 4
Cash payments on product purchases (for June and July)
From purchases in Total % Paid June July
May................................................$308,000 40% $123,200
June...............................................638,000 60 382,800
Part 5
AZTEC COMPANY
Cash Budget
June and July
June July
Cash disbursements
Payments on purchases............................................. 506,000 569,360
Selling and administrative expenses......................... 110,000 110,000
Interest expense*......................................................... 250 437
Ending loan balance**................................................... $ 43,650 $ 0
* Interest expense ** Loan balance
June = $25,000 x 12%/12 = $250 June = $25,000 + $18,650 = $43,650
July = $43,650 x 12%/12 = $437 (rounded) July = $43,650 - $43,650 = $0
Problem 22-7A (Concluded)
Part 6
Information about the need for cash in the near future would be helpful to
the management of Aztec Company because they would be able to enter
In addition, a good cash budget is likely to be helpful to management in
negotiating the terms of the loan. In this situation, the company can tell the
bank that it will need another loan in the following month. Hopefully, the
Part 1
DIMSDALE SPORTS CO.
Sales Budgets
January, February, and March 2016
Budgeted
Units
Budgeted
Unit Price
Budgeted
Total Dollars
January 2016........................................................7,000 $55 $ 385,000
Part 2
DIMSDALE SPORTS CO.
Merchandise Purchases Budgets
January, February, and March 2016
January February March Total
Deduct beginning inventory.................. (5,000) (1,800) (2,200)
Units to be purchased............................ 3,800 9,400 10,800 24,000
Budgeted cost per unit.......................... $ 30 $ 30 $ 30 $ 30
Budgeted merchandise purchases....... $114,000 $282,000 $324,000 $720,000
Part 3
DIMSDALE SPORTS CO.
Selling Expense Budgets
January, February, and March 2016
January February March Total
Budgeted sales.....................................$385,000 $495,000 $605,000
Sales commission percent..................x 20% x 20% x 20%
Sales commissions expense............... 77,000 99,000 121,000 $297,000
